No “Contract A” If You Say So Clearly


Case comment – Maple Ridge Towing v. Districts of Maple Ridge and Pitt Meadows, BC Supreme Court, September, 2001

How did parties contract, in the bidding and tendering context, before the Supreme Court of Canada decisions in Ron Engineering (1981) and MJB Enterprises (1999)?

As readers of this newsletter know, Ron Engineering and MJB Enterprises establish the Contract/Contract B principle. Namely, that by issuing a tender or bid or package, the law will interpret that the owner or purchasing body effectively enters into an agreement (“Contract A”) with bidders that they will award the contract for the work or procurement (“Contract B”) to the successful bidder according to the selection criteria and other terms and conditions set out in the bid or tender package.

But what if the bid or tender package effectively says “We choose not to buy into the Contract/Contract B principle for the purposes of this bid or tender package, the Contract/Contract B principle won’t apply, and instead for this bid or tender if you want to do business with us then submit a bid and we’ll select a bidder that we determine best suits our needs. We also reserve the right to modify terms and negotiate with bidders.”

In the Maple Ridge Towing case, the BC Supreme Court answered this question by essentially saying “that’s okay, you can do that if you choose to, so long as you set it out clearly”.

The outcome of this case is sensible. The Contract/Contract B principle is, obviously, a principle of contract law. Within the realm of contract law, parties should, by and large, be able to contract any way they choose. The Maple Ridge Towing case recognizes this.

A few additional comments and observations:

  1. would not suggest that owners or purchasing bodies try to take this too far. Judges have an arsenal of legal principles to base their decisions on, and if a Judge figures that you have not treated bidders fairly, then (even though “fairness” is not a legal principle on its own), the law is flexible enough, most times, to allow the Judge to apply a legal principle that will favour the unfairly treated bidder. They don’t teach this as legal theory in law school, but that’s often the way it works (and that’s not a bad thing, really).
  2. This can work both ways. What happens if you have no Contract A, and the bidder wants to back out? The bidder can. Ron Engineering was not a case where the bidder was trying to enforce Contract A – rather, it was a case where the owner wanted to enforce Contract A (and the bidder, having made a mistake in its bid, was trying to back out).
  3. By the way, if you are the owner or purchasing body, there are ways that you can have your cake and eat it too, in the sense that the bidder can be committed to keep its bid open for acceptance for, say, 60 days, but the owner has a lot of flexibility regarding which, if any, bid the owner or purchasing body will accept. But that is another topic (which I have addressed in various seminars over the years – those who have attended these seminars know that a simple “privilege clause” is not sufficient).